Help Solve for ACA Social Security Number and Name Mismatch Errors

photo of Affordable Care Act paperwork fanned out on a desk

Learn the three key questions to consider as you prepare IRS Forms 1094-C and 1095-C.

Annually preparing Affordable Care Act (ACA) forms to furnish to your employees and file with the Internal Revenue Service (IRS) can be time-consuming and complex, especially if you are an applicable large employer (ALE) with an average of 50 or more full-time employees (and full-time equivalents). The process requires gathering and reconciling data from several sources — all so you can determine how to accurately complete each Form 1095-C, Employee-Provided Health Insurance Offer and Coverage.

Meanwhile, your Form 1094-C, Transmittal of Employer Provided Health Insurance Offer and Coverage Information Returns, must contain correct and aggregate information for all forms filed for the ALE.

The Form 1094-C and 1095-C data provides the IRS with the necessary information to determine:

  • If the employer offered minimum essential coverage (MEC) to at least 95% of their full-time employees and their dependents
  • If the employer offered MEC to each ACA-eligible full-time employee at the proper time
  • If the MEC offered to full-time employees met the minimum value threshold
  • If the MEC offered to full-time employees was considered affordable based on one of the three available affordability safe harbors
  • If the employer may be liable for a proposed penalty under IRC Section 4980H(a) or 4980H(b)

What happens if any of these forms contain incorrect information, and the IRS returns an "accepted with errors" status when you file?

Employees' (or dependents') name and social security number (SSN) combinations that don't match the IRS's records is the most common form error we see. Transposed numbers or keying errors as well as name changes (legal or for a new marital status) that weren't reported to the Social Security Administration or the employer often lead to these mismatches.

Keep in mind that when a Form 1095-C triggers this error, the data you reported for that employee is not recorded with IRS because the agency does not know who the individual is. Leaving these errors unresolved, thus being inaccurate or incomplete, can lead to potential IRS information reporting penalties under IRC Sections 6721 and 6722.

How much could it cost if you don't ensure your employee data is correct?

Information reporting penalties can be as high as $310 per form and up to a maximum of $3,783,000 for forms due to be furnished and filed in 2024. The actual cost depends on how long it takes to correct the information with IRS. If the IRS determines the error was a case of intentional disregard, the per form penalty goes up to $630 per form with no maximum.

Year-end reporting isn't over after transmitting and/or furnishing forms to your employees. What process do you have in place to correct these errors?

Should you receive an IRS proposed penalty notice for information reporting errors, you will need to respond, detailing the steps you took to obtain correct information per the guidelines outlined in IRS Publication 1586, Reasonable Cause Regulations. Having a process in place to manage these errors is key to your ACA compliance strategy.

Key questions to consider as you prepare these forms:

  • Do you have a process in place to get the correct information from your employee to resolve the error(s)?
  • Are you aware of the required steps employers must take to comply with IRS regulations and request a reasonable cause waiver of penalties?
  • Are you keeping records or documentation of the dates and steps taken to correct errors?

Using solutions and leveraging third-party providers can help support your organization's mission for ACA compliance and allow you to focus on the tasks beyond ACA.

Next steps

You deserve a better way to manage ACA compliance.

Learn more about ADP SmartCompliance® for Health Compliance.

This ACA penalty calculator can help you learn how to avoid penalties proactively.